Customs duty evasion conspiracy leads to penalties under Customs Act

The judgment concluded that the appellants were involved in a deliberate conspiracy to evade customs duty through mis-declaration, undervaluation, and mis-classification of goods. The importer and its director were deemed as the main conspirators, aided by Customs House Agents, freight forwarders, and consultants. The imported goods were confiscated, and penalties were imposed under the Customs Act. The judgment emphasized the need for a systemic review to rectify customs clearance procedures and prevent similar incidents in the future.

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Issues Involved: Mis-declaration of goods, undervaluation of goods, mis-classification of goods, non-compliance with BIS and WPC certification requirements, and the role of various parties in customs duty evasion.

Detailed Analysis:

1. Mis-declaration of Goods:
The appellants, including M/s Pax Technologies Pvt. Ltd., were found to have mis-declared the description of imported goods, such as MPOS devices, to avoid customs scrutiny and compliance with import regulations. The goods were declared under misleading descriptions like "paper rolls" and "barcode readers," which were far from their actual nature. This was done to circumvent the requirement of obtaining BIS and WPC certifications and to evade customs duty. The investigation revealed that the importer and its director, Ms. Latha Priyadarshini, were fully aware of the nature and value of the goods but chose to mis-declare them deliberately.

2. Undervaluation of Goods:
The goods were undervalued significantly below their actual transaction value. The Master Distribution Agreement between the importer and the supplier indicated the correct prices, which included hardware and software license fees. However, the declared values in the Bills of Entry were drastically lower, sometimes as low as USD 0.25 per unit. This undervaluation was a clear attempt to evade customs duty. The investigation confirmed that the importer and its director were aware of the correct values but chose to declare lower values to evade duty.

3. Mis-classification of Goods:
The imported goods were mis-classified under inappropriate Customs Tariff Headings to avoid higher duties and compliance requirements. For example, MPOS devices were classified under headings for paper products or plastic articles. The correct classification should have been under Chapter Heading 84713090, which pertains to Automatic Data Processing Machines. The investigation revealed that the importer and the clearing agents deliberately chose incorrect classifications to evade customs duty and compliance with BIS and WPC certifications.

4. Non-compliance with BIS and WPC Certification Requirements:
The imported MPOS devices required BIS certification and ETA from the WPC Wing of the Department of Telecommunication. The importer failed to obtain these mandatory certifications. Despite being aware of these requirements, the importer and its director chose to circumvent them by mis-declaring and mis-classifying the goods. This non-compliance rendered the goods liable for confiscation under Sections 111(d) and 111(m) of the Customs Act.

5. Role of Various Parties in Customs Duty Evasion:
The investigation highlighted the involvement of various parties, including Customs House Agents (CHAs), freight forwarders, and consultants, in facilitating the evasion of customs duty. The CHAs failed to verify the genuineness of the import documents and did not guide the importer about the statutory requirements. They filed Bills of Entry based on documents provided by unauthorized persons and mis-classified the goods. The freight forwarder and consultant also played crucial roles in the conspiracy by facilitating the clearance of goods without proper documentation and compliance.

Conclusion:
The judgment concluded that the appellants were involved in a deliberate and well-planned conspiracy to evade customs duty by mis-declaring, undervaluing, and mis-classifying the imported goods. The importer and its director were found to be the main architects of this conspiracy, with the active involvement of CHAs, freight forwarders, and consultants. The goods were rightly confiscated, and penalties were imposed under various sections of the Customs Act. The judgment also called for a systemic review and vigilance enquiry to address the lapses in customs clearance procedures and prevent such instances in the future.

(Order pronounced in open court on 12/03/2020)

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